Managerial Accounting
4th year
Section 2
EXERCISE 8–15The Production Department of Hruska Corporation has submitted
the following forecast of units to be produced by quarter for the upcoming fiscal
year:
Each unit requires 0.2 direct labor-hours and direct laborers are paid $12.00 per
hour. In addition, the variable manufacturing overhead rate is $1.75 per direct
labor-hour. The fixed manufacturing overhead is $86,000 per quarter. The only
noncash element of manufacturing overhead is depreciation, which is $23,000 per
quarter.
Required:
1. Prepare the company’s direct labor budget for the upcoming fiscal year,
assuming that the direct labor workforce is adjusted each quarter to match the
number of hours required to produce the forecasted number of units produced.
2. Prepare the company’s manufacturing overhead budget.
Solution:
1
Managerial Accounting
4th year
EXERCISE 8–16 The production department of Zan Corporation has submitted the
following forecast of units to be produced by quarter for the upcoming fiscal year:
In addition, the beginning raw materials inventory for the 1st Quarter is budgeted
to be 6,000 grams and the beginning accounts payable for the 1st Quarter is
budgeted to be $2,880. Each unit requires 8 grams of raw material that costs
$1.20 per gram. Management desires to end each quarter with an inventory of
raw materials equal to 25% of the following quarter’s production needs. The
desired ending inventory for the 4th Quarter is 8,000 grams. Management plans
to pay for 60% of raw material purchases in the quarter acquired and 40% in the
following quarter. Each unit requires 0.20 direct labor-hours and direct laborers
are paid $11.50 per hour.
Required:
1. Prepare the company’s direct materials budget and schedule of expected cash
disbursements for purchases of materials for the upcoming fiscal year.
2. Prepare the company’s direct labor budget for the upcoming fiscal year,
assuming that the direct labor workforce is adjusted each quarter to match the
number of hours required to produce the forecasted number of units produced.
Solution:
2
Managerial Accounting
4th year
3